Budgeting & saving
Budget 2021: Key take-aways for financial planners
25 May 2021
Budgeting & saving
25 May 2021
Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.
In a year of rapid and ongoing regulatory changes in financial advice, a budget with limited impact on planners and clients is welcome.
With the federal government focussed on spending to create jobs and stabilise our economy, it was, overall, a pretty uneventful budget from a financial advice perspective. However, the lack of any change to the ASIC funding model in the budget announcement suggests that the government has no plans to review financial planners fee increases, which is disappointing.
There are a handful of changes that will impact planners and their clients in the next financial year, with measures commencing from July 2022 to keep on the radar.
Indexation has triggered higher superannuation thresholds for many transfers and contributions. Minimal annual withdrawal amounts for account-based pensions will return to pre-COVID-19 default levels from 1 July 2021. The government is also going ahead with the scheduled increase to mandated Super Guarantee payments, increasing from 9.5 per cent to 10 per cent from 1 July 2021.
If passed into legislation, the following changes announced will be effective from 1 July 2022. For financial planning clients making choices about their super and retirement income in the coming year, these changes may have an impact on their current and future options.
From 1 July 2022, people aged 67 to 74 will be able to make or receive superannuation contributions (non-concessional and salary-sacrificed) without meeting the work test. This includes contributions made under the bring-forward rule and all contributions will be subject to the relevant caps.
Individuals in this age range making personal deductible contributions will need to meet the work test.
Individuals aged 60 and over will be allowed to make a one-off post-tax downsizer contribution of $300,000 from the sale of their home, without impacting their non-concessional cap. This reduces the age from 65 which was the lower limit introduced with this measure from 1 July 2018.
The minimum threshold of $450 monthly earnings to be eligible for super guarantee payments will no longer apply.
For a two-year period expected to start on 1 July 2022, individuals holding certain legacy retirement products will be able to exit these products and transfer their balance to more contemporary retirement products. Examples of legacy products include market-linked, life-expectancy and lifetime products including those in SMSF.
This measure does not apply to flexi-pension products or a lifetime product in a large APRA regulated or public sector defined benefit schemes.
A second new measure is the No Negative Equity Guarantee on PLS arrangements. This means the Government will not claim back more than the sale price of the house used to guarantee the payment when it is sold.
The budget measure will also make an allocation to advertise the PLS and raise awareness. When this campaign gets underway, financial planners may be asked more questions about the PLS, particularly from clients expecting to receive the Age Pension as one of their income sources in retirement.
A number of support measures for businesses introduced due to the COVID-19 pandemic and restrictions have been extended for a further financial year. This means financial planning practices and their business owner clients can continue to benefit from the following tax deductions in the 2021/22 and 2022/23 financial years:
This allows companies to claim back tax paid in prior financial years back to 2018-19 where a tax loss occurs until the end of the 2022-23 financial year.
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More on the budget from your FPA team:
Visit the FPA members portal to access our 2021/22 budget resources
Listen to the podcast
Tags in this article: Budgeting & saving, Work, Business
Budget 2021: Key take-aways for financial planners25 May 2021 In a year of rapid and ongoing regulatory changes in financial advice, a budget with limited impact on planners and clients is welcome. With the federal government focussed on spending to create jobs and stabilise our economy, it was, overall, a pretty uneventful budget from a financial advice perspective. However, the lack of any change to the ASIC funding model in the budget announcement suggests that the government has no plans to review financial planners fee increases, which is disappointing. There are a handful of changes that will impact planners and their clients in the next financial year, with measures commencing from July 2022 to keep on the radar. From 1 July 2021
Indexation has triggered higher superannuation thresholds for many transfers and contributions. Minimal annual withdrawal amounts for account-based pensions will return to pre-COVID-19 default levels from 1 July 2021. The government is also going ahead with the scheduled increase to mandated Super Guarantee payments, increasing from 9.5 per cent to 10 per cent from 1 July 2021.
Superannuation changes from 1 July 2022If passed into legislation, the following changes announced will be effective from 1 July 2022. For financial planning clients making choices about their super and retirement income in the coming year, these changes may have an impact on their current and future options.
From 1 July 2022, people aged 67 to 74 will be able to make or receive superannuation contributions (non-concessional and salary-sacrificed) without meeting the work test. This includes contributions made under the bring-forward rule and all contributions will be subject to the relevant caps. Individuals in this age range making personal deductible contributions will need to meet the work test.
Individuals aged 60 and over will be allowed to make a one-off post-tax downsizer contribution of $300,000 from the sale of their home, without impacting their non-concessional cap. This reduces the age from 65 which was the lower limit introduced with this measure from 1 July 2018.
The minimum threshold of $450 monthly earnings to be eligible for super guarantee payments will no longer apply.
For a two-year period expected to start on 1 July 2022, individuals holding certain legacy retirement products will be able to exit these products and transfer their balance to more contemporary retirement products. Examples of legacy products include market-linked, life-expectancy and lifetime products including those in SMSF. This measure does not apply to flexi-pension products or a lifetime product in a large APRA regulated or public sector defined benefit schemes.
A second new measure is the No Negative Equity Guarantee on PLS arrangements. This means the Government will not claim back more than the sale price of the house used to guarantee the payment when it is sold. The budget measure will also make an allocation to advertise the PLS and raise awareness. When this campaign gets underway, financial planners may be asked more questions about the PLS, particularly from clients expecting to receive the Age Pension as one of their income sources in retirement. Extending support for Australian businessesA number of support measures for businesses introduced due to the COVID-19 pandemic and restrictions have been extended for a further financial year. This means financial planning practices and their business owner clients can continue to benefit from the following tax deductions in the 2021/22 and 2022/23 financial years:
This allows companies to claim back tax paid in prior financial years back to 2018-19 where a tax loss occurs until the end of the 2022-23 financial year. **** More on the budget from your FPA team: Visit the FPA members portal to access our 2021/22 budget resources Listen to the podcast |
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